Transitional remuneration and additional severance payment – effective date 1 July 2015

• Netherlands

• Employment law

03-07-2014

1. Transitional remuneration

As per 1 July 2015 the transitional remuneration will be introduced as part of the new dismissal law. The aim of the transitional remuneration is to enable employees to improve their employability and to mitigate the consequences of a dismissal. In case of non-renewal of a fixed term contract that has lasted at least 2 years and in case of dismissal either through UWV or the Cantonal Judge after at least two years of employment the employer has to pay the employee a transitional remuneration. As from 1 July 2015 the Cantonal Judges Formula will cease to apply for the calculation of severance payments.

2. Height of the Transitional remuneration

Over the first ten years of employment, the employee will receive a remuneration of 1/6 monthly salary for every six months of the duration of the employment (this corresponds to a remuneration of 1/3 of the gross monthly salary for every year of service), and subsequently 1/4 of the gross monthly salary per six months that the employment contract lasted for the period over ten years (this corresponds to a remuneration of 1/2 of the gross monthly salary for every year of service). The monthly salary will be increased with the holiday allowance, and any other fixed elements, such as a fixed overtime allowance, a 13th month, and the average bonus calculated over the last 3 years, calculated on a monthly basis.

Only completely worked 6 months periods will be taken into account for the calculation of the transitional remuneration. An employment of 6 months and 1 day will not be round up to 1 year. In case of an employment of 4 years and 5 months, the 5 months will not be taken into account for the calculation of the transitional remuneration. 

The remuneration will be capped at EUR 75,000 gross or one annual salary if the employee earns more than EUR 75,000 gross per year. 

Given their position on the labour market employees over 50 years with at least 10 years of service, unless employed by an employer with less than 25 employees, will until 1 January 2020 be entitled to a higher transitional remuneration. Over the years of service worked above the age of 50 those employees will be entitled to 1 monthly salary per year of service. 

The employer is allowed to deduct costs which relate to maintaining the employability of an employee, such as outplacement and training/education fees, from the transitional remuneration. However, this will not count for fees of training/education which are required for the fulfilment of the current position of the employee.

Deviating from the transitional remuneration will be possible in collective labour agreements if the employees will be entitled to equivalent facilities. 

3. Exceptions

In principle the transitional remuneration must always be paid in case of termination or non-renewal at the employer’s initiative, unless:

• the dismissal is the result of seriously culpable acts or omissions of the employee;
• the employee is younger than 18 years and works less than 12 hours per week;
• the employment agreement will terminate when the employee reaches the pensionable age.
• the employer has been granted a moratorium, has been declared bankrupt or is in debt restructuring;

Furthermore no transitional remuneration is due in case of a mutual consent termination – which should be distinguished from the employee consenting to dismissal in writing – as the parties then are expected to agreeing on the terms and conditions of the termination of employment themselves.

4. Additional severance payment

In the case of seriously culpable acts or omissions of the employer the Cantonal Judge may grant an additional severance payment. This additional severance payment will be paid on top of the transitional remuneration and is not subject to a maximum. The height of severance payment shall be determined based on the circumstances.